FGV to cut reliance on CPO, turn itself into agri & food giant

PETALING JAYA: FGV Holdings Bhd said it plans to leverage on the upturn in CPO price to build more a more resilient entity and transform it into an organisation that is not wholly dependent on CPO price for its performance.

In his seven-page chairman’s third letter to shareholders, Datuk Wira Azhar Abdul Hamid said FGV will be repositioned as a major player in the agriculture and food industries.

“While palm oil will remain a mainstay of our business, we will also deliberately and carefully redeploy appropriate resources into higher value and synergistic sectors to mitigate against the risk of CPO price fluctuations,” he said.

Azhar noted that the group’s efforts have not translated into a corresponding improvement in the bottom line, as crude palm oil (CPO) price remained frustratingly low for most of the year and FGV’s business transformation continued to unearth legacy issues.

However, he believes the worst is over for the troubled conglomerate, thanks to the efforts taken over the last 12 months to turn FGV’s losses around.

While MSM Malaysia Holdings Bhd is still facing challenges, he stressed that there are plans in place to address them, “sooner rather than later.’’

Azhar applauded the efforts of FGV’s plantations team, saying that while the targets were not met, there was a marked improvement from 2018.

As at November 2019, FGV’s fresh fruit bunch (FFB) production and yield stood at 4.17 mill metric tons (MT) and 17.28 MT per ha respectively, for which its targets were 4.79 mill MT and 19.43 MT/ha. In November 2018, FFB production and yield stood at 3.83 mill MT and 15.36 MT/ha respectively.

On disposal of non-core assets, FGV has sold RM129 million’s worth as at November 2019, below its target of RM350 million.

FGV is targeting cumulative earnings of RM248 million a year from each acre it has.

To do this, the group has developed a threepronged strategy, including restoring palm oil businesses, developing new earning streams from the circular economy to create value and identifying adjacencies to existing revenue streams to optimise returns.

Azhar said FGV has doubled its sales volume, revenue and sales margin of animal feed, achieving a revenue and profit margin of RM9.9 million and RM61.76/MT for 2019 compared with RM5.6 million and RM34.42/MT in 2018.